Reblog: What is Interactive Advertising?

On May 15, 2006 by Christy

Here is a great essay on Interactive Advertising that was published in the Convergence Newsletter (from Newsplex at the University of South Carolina, vol. III, No.11, May 9 2006), that I thought I’d reblog here:

What is Interactive Advertising?
  
By Cheryl Harris, associate professor, School of Journalism and Mass Communications, University of South Carolina

  
With varying degrees of permitted response and functionality, interactive advertising offers viewers the opportunity to interact with ads by requesting additional information, expressing opinions and/or making purchases. Interactive advertising must be sufficiently persuasive to generate a response from the viewer. Increasingly, it appears that effective advertising in the convergent media age is advertising that has been customized or personalized to fit the current preferences of the viewer. In general, advertisers have learned that “one size fits all” advertising generates much lower response rates than targeted ads. As the digital platforms for Interactive Television (ITV) or Internet Protocol Television (IPTV) come online, some advertisers are already experimenting with various types of customization and personalization that will be coupled with interactive response functions.

   
There are several years of successful interactive advertising campaign implementations in European and British ITV and more than a decade of accumulated knowledge acquired from Internet advertising experience that has emphasized interactivity as a key function from its inception. Internet advertising practitioners believe that the campaigns that receive the highest response rates are also those that take advantage of personalization options such as collaborative filtering, behavioral targeting, and other types of profiling and customization.

It is worth noting, however, that there is no clear agreement on what constitutes interactivity, or that it is compelling quality for users (Harris, 1997). Despite the apparent success of interactive advertising on test platforms such as ITV (Lee, 2005), there remain many unexamined assumptions about interactivity and the value of personalization that require much more rigorous theoretical frameworks and evaluation. At least one study that examined the perceived value of personalization and interactive content reported “mixed results,” finding that too much choice diminished impact (Varan, 2004).
 
Types of Interactive Advertising
There are numerous categories of interactive advertising executions varying by medium. Internet advertising alone has several modes, from banner advertising, pop-up/pop-under, interstitial (an ad that appears as an interim display between a page request and the delivery of the requested page), and search-engine advertising (ad messages appearing within a page of search results, and which ideally relate directly to the keywords/topic for which the user is searching.) The popularity, and effectiveness, of search engine advertising has displaced the majority of ad dollars in other types of Internet advertising for the moment. Similarly, interactive television has developed various types of advertising messages, offers, and strategies, such as the “Dedicated Advertiser Location” (DAL) button on a handset, for which premium rates are charged to advertisers (Morrisey, 2005; Lee, 2005.)
  
If we categorize interactive advertising in terms of the response desired, or capability delivered, rather than the form of the ad, we have a more functional typology identifying the function and description of interactive advertising:
 
= Jump: Viewer may go to a location (i.e., a Web site, product catalog, order form, etc.) via a link; can include sponsored content.

= Tag: Tag a message, offer, site, or piece of content for later access.

=Direct Response: Viewer interaction results in a direct purchase opportunity or may trigger a follow-up sales call.

=Poll: Engage viewer through poll or quiz question(s.) May feed back results in real-time to further engage viewer.

=Gaming: Engage viewer through gaming activity. May include incentives or rewards.

=Opt-in Rewards: Viewer response patterns are aggregated and often displayed onscreen; response targets are rewarded with various incentives, such as discounts or free merchandise.

=Targeted: Viewer profile (demographic, psychographic, behavioral, etc.) triggers customized message and/or offer.

=Authorial: A variation on gaming; viewer is invited to contribute to, or reshape content in real time, as in interactive storytelling applications; be partnered with a specific offer or in a “sponsored content” format, with links to information or offers. 

A central premise of Internet advertising practice has been that the longer the viewer is encouraged to remain in the advertising and/or retailing environment and, ideally, the more they engage with the content/features of that environment, the more likely they are to buy. Similarly, the interactive television model values “dwell-time” and correlates it with higher response rates (Lee, 2005).
  
Interactive advertising development and implementation across multiple platforms has been slower than expected for a variety of reasons, including the uneven distribution of broadband access, inconsistent audience research results and viewer privacy/security concerns. Targeting and analytics technologies that would facilitate interactive advertising have also been considered immature by many experts.

Still, the ability of interactive advertising to connect consumers directly and immediately to ad messages in a variety of highly customizable formats continues to fuel development of the medium. Most major advertising agencies now have at least one subsidiary unit working solely on interactive advertising, and in the U.S. agencies dedicated to advertising applications in the coming ITV environment, such as Ensequence (headquartered in Portland, Oregon), are also cropping up.  In 2005 and 2006, advertisers reported moving more dollars to interactive advertising, away from traditional media, which contributed to renewed interest in interactive advertising innovation.
  
Industry Standards
Traditional advertising/marketing industry trade groups, such as the Direct Marketing Association (DMA) and Association of National Advertisers (ANA), have established guidelines for interactive advertising practitioners. Within the past 5-10 years, new industry associations, such as the Interactive Advertising Bureau (IAB) have emerged to facilitate the development of the medium.

These guidelines cover a wide variety of issues, but dominant among them are practices associated with creative execution, lead generation, and privacy protections. Some industry practitioners believe that the aggressive, and sometimes fraudulent, tactics of e-mail marketers have tainted the interactive advertising industry. Other concerns include the use of network-delivered software spiders, bots, agents, and Trojans that collect consumer data without the knowledge of the user. Consequently, industry standards for legitimate interactive advertising have striven to emphasize consumer protections.
   
Industry guidelines include a focus on “opt-in” or permission-based advertising, whereby consumers receive ad messages and offers only in response to a specific request. This rules out indiscriminate ad placements and “spamming” and, in effect, forces the advertiser to integrate consumer profiling and targeting efforts within the interactive environment. Other guidelines have been definitional: what constitutes an “impression” in interactive advertising terms, what is a valid “click through” and what may be considered a “sale” (IAB, 2006).
   
Establishing working definitions in the interactive advertising vocabulary is important because of the different monetary values placed on various types of interactive outcomes. So far, advertisers are willing to pay the highest rates for ad placements that result in direct sales, followed by click  throughs (which may include follow-up requests) and impressions.
    
Challenges Ahead
Response rates for interactive advertising are likely to be challenged by increased demand for consumer control of media delivery. For example, digital video recorders (DVRÂ’s) allow viewers to time-shift programming and to avoid interstitial advertising.
  
Some studies suggest that “92% of ads are skipped” by DVR users, although TiVO’s research suggests that number is lower, but still in the range of a substantial 70%+ of viewing activity that involves skipping ads (Borland, 2005).  Foote Cone & Belding recently released a commercial for the Kentucky Fried Chicken chain that allows viewers to “crack a hidden message if they play the spot back slowly on a digital video recorder or VCR” (CNN.com, 2006).  This is an attempt to encourage DVR users to attend to the ads that research has shown so many would otherwise avoid.
   
TiVO was criticized when it announced in late 2004 an initiative that would superimpose banner ads and/or commercial logos over prerecorded advertising within shows through which the viewer was attempting to fast-forward. So far, it has not yet implemented this concept on a systemwide scale (Chapell,  2004). Other similar attempts to circumvent viewer ad-skipping will likely be seen in the coming months and years as advertisers experiment with the interactive advertising business models. At the same time, new devices are likely to continue to be introduced that allow consumers to further control media and to strip out advertising if desired. The pressure to produce engaging, immersive viewer experiences that contain advertising content that is relevant and compelling will only grow.
 
A recent study released by Frank Magid Associates demonstrated that consumers who own Apple iPods (or would like to buy one) would accept advertising in exchange for free downloads of TV shows and other content (Oser, 2006).  On April 10, 2006, Disney announced that it would make many of its most popular shows available online at no cost, although with especially encoded advertising that could not be “zapped” out (Reuters, 2006). CBS recently announced a plan to produce a 60-second program, scheduled during its evening primetime slot, which would end each mini-episode with a “cliffhanger.” The show, to be called The Courier, is intended to engage audiences so that they will not skip the advertising surrounding, or embedded within, the show itself (McClellan, 2006). Ad-sponsored “mobisodes” for delivery on mobile devices are also in active development. It is important to keep in mind, though, that many industry observers believe that ad-sponsored content may ultimately fail in a fully convergent, digitalized media world.  Threats include piracy, consumer-generated content, and the continuing fragmentation of audiences.

Despite the obvious challenges, advertisers are mostly optimistic about the outlook for interactive advertising. One aspect of particular interest is the potential to accurately and comprehensively measure consumer response. In a world where content will be delivered in a “converged,” networked environment, everything can be tracked and measured. Powerful data-mining techniques will allow advertisers to forecast and model response and fine-tune advertising executions with near-perfect knowledge. This would certainly represent a revolution in how media and advertising response has been assessed in the past. The providers of media audience data in this country, primarily Arbitron and Nielsen, are in a state of upheaval. Currently, neither has introduced an acceptable methodology for measuring portable device and personalized media delivery that can be easily correlated with viewer response, and for which their clients have been calling (McClellan, 2006; Whiting, 2006).
 
Advertisers have also been concerned about flaws in ad delivery and tracking technologies that can result in problems such as “click fraud,” or tactics by which competitors or others can improperly boost apparent response to an interactive ad, but which were not the result of a ‘true’ consumer response.
The search-engine advertising leader Google recently paid more than $90 million to settle claims from advertisers that its ad delivery system did not prevent click fraud. (Newcomb, 2006).
 
GroupM CEO Irwin Gotlieb told Adweek that “next-generation screens and digital boxes will be enabled to produce higher ROI … and real-time optimization” and, consequently, more precise and accurate targeting of content and/or advertising. He also noted that the industry believes that digitalization of media delivery will “allow us to gather data in an entirely different way – at the census level as opposed to the sampling level” (McClellan, 2006).
 
Lessons learned from this kind of data could eventually allow advertisers and content providers to apply powerful behavioral targeting techniques that would further customize advertising messaging across several digital platforms. These same lessons might also be applicable to journalists attempting to add interactivity to their messages. 

References
 
Borland, J. (2005). What creature will succeed the couch potato? CNET News.
Retrieved December 5, 2005, from http://news.com 

Chapell, A. (2004). TiVo 2.0. Retrieved November 30, 2004, from iMediaconnection.com 

CNN.com. (2006). What’s the secret of that KFC commercial?  Ad designed to make viewers slow down — viewing, anyway. Retrieved February 26, 2006. 

Harris,  C. (1997). Theorizing Interactivity. Marketing and Research Today, 25(4), 267-271. 

IAB.  (2006.) Interactive Advertising Bureau, http://www.iab.net.

Lee, J. (2005). An A-Z of interactive TV. Campaign, 13. 

McClellan, S., and Burgi, M. (2006, March 1, 2006). Adweek roundtable: Media mixes it up. Adweek.com 

Morrissey, B. (2005, March 28). Can interactive TV revive the 30-second spot? Adweek.com 

Newcomb,  K.  (2006). Google to settle click fraud suit for $90 million. ClickZ News.  Retrieved April 20, 2006, from http://www.clickz.com/news/article.php/3590251   

Oser, K. (2006, March 7). Most consumers would watch ad for free TV download. Advertising Age. 

Reuters. (2006). Disney to make TV shows available free on web.  Retrieved April 10, 2006. 

Varan, D. (2004, August). Consumer insights associated with interactive television. Retrieved March 10, 2006, from http://www.broadcastpapers.com/whitepapers/Consumer-Insights-Associated-with
-Interactive-Television.cfm?objid=32&pid=576&fromCategory=44
   
Whiting, S. (2006, March 1). To our clients. In N. M. R. Clients (Ed.). New York: Nielsen Media Research.